A recent ECJ judgment on the interaction between inter-municipal cooperation and EU law

By its recent judgment in the case C-480/96 Stadtreinigung Hamburg the ECJ sets out in which conditions an inter-municipal cooperation agreement falls outside EU law, especially the EU public procurement rules. Public authorities, especially municipalities, enter into inter-municipal cooperation agreements as a way of discharging their public functions. These agreements constitute a cost-effective option for delivering a wide range of public services, and they are based on forms of public law (such as statutory joint authority, joint committee, or delegation of powers) or private law forms (contracts creating a joint venture company or outsourcing public tasks).
In Stadtreinigung Hamburg the ECJ considered whether a contract concluded by a number of German local authorities, by which they pooled together their own resources (capacity at a thermal incinerator and spare landfill capacity) in order to perform statutory public interest tasks regarding waste disposal was caught or not by the EU public procurement rules. On the basis of a functional approach, focused on the substance of the agreement, the ECJ found that the litigated contract was not aimed at providing an economic activity, but at setting up a framework for administrative cooperation (joint exercise of the public tasks), thereby falling outside EU law. In that regard, the ECJ identifies a set of four elements regarding the substance of contracts establishing inter-municipal cooperation. Contracts complying with the conditions set out by the ECJ that will be shown below are so thought to not be caught by EU given that their meeting the following conditions rules out that they constitute public contracts with the purpose of EU public procurement rules:
• Purpose: the contract is to be concluded only in pursuance of a public interest;
• Subject matter: by the contract the parties share their own resources with the view to pursue a public interest;
• Remuneration: the contract shall not give rise to any financial payments between the parties.
• Effects on non-contracting parties: the contract has no effects whatsoever on private undertakings.
On the one hand, the judgment strengthens the public authorities freedom to decide how to best organize the supply of public tasks; on the other hand, it may be thought to negatively affect the working of internal market because leading to less market transparency with the entailing risk of anticompetitive conducts.

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